SARS scare sparks market drop

Stocks had their biggest one-day drop in seven months yesterday and the NT dollar tumbled after the government confirmed the nation's first SARS case in six months, reviving concern that the virus may return.

"Everyone is frightened about the SARS report," said Barro Liao, a fund manager at Prudential Securities Investment Trust Co (保誠投信).

Liao said he may buy stocks after the decline yesterday on expectations the spread of the disease will be limited.

The panic selling pushed the TAIEX as low as 5,718.44. But the index recovered slightly after Minister of Finance Lin Chuan (林全) said the ministry will "deal with the event of abnormal fluctuations in the stock market if there are any irrational moves."

"The report of the new SARS case is definitely affecting market sentiment," said Lin, in response to queries from lawmakers.

He didn't say whether the ministry was active in the stock market yesterday.

The TAIEX lost 135.22, or 2.3 percent, to close at 5,752, its biggest percentage drop since April 25. The Taiwan futures index shed 2.6 percent to 5,750.

Turnover expanded to NT$94.99 billion (US$2.79 billion) from Tuesday's NT$57.24 billion, with 750 stocks ending lower, 110 higher and 75 unchanged.

The New Taiwan dollar fell NT$0.026 to close at NT$34.042 against its US counterpart, with a turnover of US$650 million.

"The SARS report caused stocks to fall, leading people to immediately expect the New Taiwan dollar to drop because foreign investors may hesitate," said Pory Shih, a Taipei-based foreign-exchange trader at Chang Hwa Commercial Bank (彰化銀行).

"People may be fearful of an outbreak that will drag the economy," Shih said.

But George Wu (吳裕良), a Primasia Securities analyst, said potential damage to the stock market should be limited since the government should have learned the lessons from this year's earlier SARS outbreak.

"It is natural to see some panic reaction when there is news like this," Wu said. "But as investors regain calmness and refocus on fundamentals, I am not too worried -- barring a repeat of a sudden outbreak, which looks unlikely."

Shares of China Airlines and Eva Airways fell on fears that the government may adopt travel restrictions to prevent further spread of SARS, although these stocks did later recoup some of their losses.

China Airlines Co (華航) fell NT$0.45, or 3 percent, to NT$14.75, and Eva Airways Corp (長榮) lost NT$0.40, or 2.8 percent, to NT$14.05.

United Microelectronics Corp (UMC, 聯電) cut production at one of its semiconductor plants after materials used to make chips were contaminated, a Chinese-language newspaper said, citing Managing Director John Hsuan (宣明智). Shares of UMC shed NT$0.80, or 2.8 percent, to NT$28 on the TAIEX.

The contamination, which occurred in November, will reduce the company's shipments to some customers this month and forced the chipmaker to shift production to its Silicon Integrated Systems Corp (矽統) unit, the paper said.